Data Collection
Data for report purposes was obtained from business journals, internet newspapers, various articles written within recent years, and specialized magazines. The following are the lists of journals and newspapers that provided the data herein:
- China daily- this is an official mouthpiece of the Chinese government. It states the various initiatives that the most profitable automobiles companies within China have embraced to maintain their gigantic might. The newspaper is printed in Shanghai, Guangzhou, Beijing, and New York.
- China car Times- it has grown drastically since 2006 and serves over one million views monthly. It is rated among the top resource for the Chinese car industry.
- Strategic Management Journal (SMJ)- this is more like an academic journal that publishes articles related to business modeling innovations and strategic management since 1980.
- China Hourly- this is an online newspaper that reference business agreements within China. Such agreements revolve around marketing initiatives, among other search services.
DATA ANALYSIS
Data is used to answer the research question. The analysis is based on publications and reviews related to conceptual business models. The following are the overviews of the Chinese automotive industry ranging from internal factors to external factors.
Chinese automotive industry overview
The automotive industry in China grew to be known back in 2001 after the country signed into the World Trade Organization. Since then, it has boomed amazingly fast. In 2003 alone, the Chinese market had doubled in size. It grew from 4.56 million automobiles to 9.67 million units (2018). In 2009, the Chinese market overtook all other global leaders in terms of the automotive seller. For instance, during the 2009 US sold 4.8 million units against 6.1 million units sold within China. The domestic market proved to be profitable. China has ever since advanced its equipment to manufacture large scale numbers of the automobiles. The concrete base of automobile manufacturing creates a promising landscape for the car is among the best return revenue in export.
Motivation arising from the internationalization of Chinese firms
Just like other western multinational companies, China is also going global. Some of its companies have invested overseas to secure markets abroad. Some automobile companies from other countries have been attracted by the superior technology found within the Chinese borders. China has a readily available workforce and a skilled population, making it a cheaper hub for automobile production. While reduced cost is a significant consideration, the developing world cannot be considered entirely dependable because they lack a long-term secure supply feature when an automobile industry is set up. This makes China the favorite hub for such devolvement. Some automobile companies are forced to seek opportunities abroad after manufacturing due to harsh competition domestically. Such an initiative of exporting the products increases revenue received by the Chinese government.
Managerial and organizational culture
Automobile industries face managerial orientation collision. This is where the managers from other companies are enticed with a pay rise to migrate to another automobile company. When the migration occurs, the new manager comes in with the other company’s secrets where they were porched from. When there is high committed management, then the automobile sector becomes strong hence wiping those small firms that would otherwise pose competition if given time to grow. The competition applies both within China and outside it boarders.
Managerial and organizational analysis
Every manager thinks of innovation. Innovation is what makes an industry to survive in this competitive ecology. Many Chinese automobile companies compete on having aggressive pricing and low cost of labor. Most of them lack innovative features that would raise their profit margins. Some Chinese companies rely on capturing their customers from foreign companies and branding their relationship with various parastatals such as Uber and Taxify. In the long run, those companies get into a competitive global partnership, among other foreign acquisitions. Most automobile companies in China lack the aggressive culture in their managerial teams. The country has embraced the ideology of sharing the assembly notation. China automobile companies have opened various assembly operations points in Malaysia, Russia, and Iran to win clients from those countries. It has also helped the industries to cut out on import duty when they assemble the automobiles in those countries. When a product is locally assembled, they have employed the locals, creating employment opportunities in the country they are situated.
Some automobile manufacturing companies from China have purchased controlling shares in countries such as India and South Korea. They are controlling shared aims at ensuring that the deficit type of cars such as SUVs is designed and engineered to fit the country’s terrain. In 2018, other automobiles jumped into advancing their designs to match European and Northern America standards. Some independent assemblers such as Geely and Chery export small and commercial vehicles to Western Europe. The market can create opportunities for hundreds of thousands of units to be sold in North America and Europe between ‘2019-2029.’ It means that China is eroding the automobile export market soon.
Organizational capabilities
An organizational capability is the industry’s might to establish an internal structure to influence its members, creating specific competencies to its workforce to enable its employees to adopt a certain culture that fits its changing customer needs. Organizational capability also customizes an industry to win more clients due to the ambiance of competitiveness successfully. Industries with competent organizational capability are swift at implementing their workable strategies.
Organizational capabilities analysis
Most companies, such as Shanghai Automotive, have foreign ventures to enhance their intelligence towards developing independent foreign properties. This venture helps them to lower their market pressures and reduce their turgidity from the Chinese governments from registered domestic industries. Some manufacturing industries, such as the Great Wall, have constructed and mentored various repositories with hundreds of engineers. Such an investment creates room for a massive expansion in the assemblers and suppliers’ departments. Investing in new engineers means that there will be a reduced cost of labor since there is a surplus of an educated workforce. The competition among the engineers steers towards developing new and efficient models and fuel economy engines in terms of consumption.
International experience
For a firm to continually export their automobiles means that they produce quality. A good quality automobile is characterized by positively influenced employees and quality trained managerial staff. The international market has choices in terms of export sales, expansion, and the room for expansion. An industry must constantly update their automobiles before exporting them to excite their customers with an updated version of what they expect in the market.
International experience analysis
As per the aforementioned theories, most Chinese companies, including Great Wall, Chery, and Geely, lead the automakers by example through managers’ appointments with international knowledge, giving the companies a large market share. For instance, 5.8 million automobiles were sold in China in 2016, which increases 20% of the sales in 2014. According to this sales, the Chinese market for automakers attracted 27% of their general exports, thereby distributing their manufacture to over 100 countries. Of the 100 countries, none of them fall within the countries in the US and Europe. The international customer satisfaction index indicates that China had as of 2015, indicated that the number rose from 237 in 2016 to 356 in 2017. As of 2018, it meant that four out of six cars are problematic.
The problematic experience has reduced the trading price on an annual basis, making the manufacturers reduce selling costs and ensure that quality adheres. Despite the low returns of satisfaction rates, powerful competition from other automakers has forced the low Chinese performers to accelerate developmental cycles. When a developmental cycle is accelerated, the industry is forced to use low-quality materials and reduce the rate of testing the standards of what has been made. Chinese reliability has declined ever since the developmental cycle was accelerated.
According to Yip’s theory, it has forced the Chinese automobile industry to switch into selling their exports to developing countries and continents where expectations are low and the pricing commendable. The international market emphasizes high-quality manufacturing.
Externally globalized drivers
China’s economy has grown over time, and the increasing power of purchase from the wealthy and social groups have attracted various automobile industries to expand their internal market shares. China’s devolvement in the automakers’ sector has driven the global marketplace forceful expansions. It has also created wealth for vibrant staff and stakeholders.
Market factors
The market structure is what attracts buyers and sellers into having a consortium. Balancing between creating a product and having the opportunity to have the product created results in a demand and supply chain. The market can be reached through transferable marketing, whereby branding and running adverts adapt to the local level.
Market factors analysis
Chinese automakers industry has come a long way to guarantee cars and testing some manufactured units before their mass production begins. But when it is viewed from Yip’s observatory theory, the country still has a lot in filling the automotive sector gap. First, China does not have a decentralized system as per the automobile range is concerned. Some overseas industries use China as a middleman in manufacturing their products. After production, the overseas countries would sell the products or spares in the underdeveloped market with a tag of “Made in China.” This tag has made China seem like weak manufacturers, yet other companies are funded to make low products. It has made them face challenges since their Germany blocks them, among other global competitors, making them have shortages in a full-grown market internationally.
The biggest business innovation challenge is the design of mechanisms, production management capabilities, and the experience in comporting their skill and quality. A basic design matrix lacks in China, and these are designing, validating, marketing, then supplying. When all these are incorporated as a package, the Chinese market will have their automaker meeting the international standards. A quality product must meet the clients’ deadlines and insufficiency of global standards of raw materials. Most globally standardized automakers persist in meeting the centralized approach, which seems tough on the Chinese side. Such harsh environments created by the international automobile industries have made the Chinese government step in and support their own companies. However, still, it has not met the quality purported by their global competitors.
Cost factors
According to Yip’s theory, the cost factor is an important driver towards the external globalization. This framework creates economies of scale through increasing involvements in the markets and combines some centralized standardization to their industrial products. Reaming is a business scenario that can be catalyzed through learning and extensive practice. In the global market, developing a product cost is cheaper than most national products. So strategizing on the cost is a fundamental initiative in meeting the global strategy in the automobile manufacturing industries. Cost factors can create a competitive scenario whereby the country can advance their technology, improve its economies of scale, and then avail raw purchasing channels.
Competitive factors
Sharing activities is an automated default in creating competition. At times competition can be positive, while at times, it turns out negative. Positivity is wen the automakers compete to create quality products. Simultaneously, the negative setback tends to make the industries produce mass auto units, which turns out to be of poor quality. Poor quality automobile cost lives. Competition arises from the concerns of instruments found within the deep-seated problems such as morale in terms of income. For instance, a low-level competitive structure entails the strength of consistency in pricing, pre-sales, and manufacturing marketing strength. Some companies are weakened by their managerial behaviors’ harshness and their capability to access loans for strategic planning.
Technological factors
A leading-edge in any business spectrum are embracing the best innovation that can raise the company standards in the automobile sector. Technology can advance the cars into quality assurance since it can be gauged through a graphics simulator to know its efficiency. China lacks the updated image in technology; that is why they are bypassed in the international market.
Environmental factor
This factor helps add innovation in the global industries. But also creates a barrier to the ones that resist changes made to curb environmental pollution. Many companies have moved into producing electric cars. This means that soon the use of fuel will be scrapped. Many companies in China have reviewed their engine assembly architect into producing hybrid vehicles. These hybrids save on fuels and use solar, among other green energies advisable by UNEP. Such changes have made some companies erupt into giants because they get commendations from the global parastatals.
Conclusion
The report was aimed at analyzing challenges and opportunities of business model innovations in China’s manufacturing industry. The integrated framework tests the empirical validity. This report further poses a comprehensive model for the automakers in terms of a global analysis. It also equates the resulting notion brought by internal and external factors. The literature suggests the expansive vector if there is a need for growth in automobile manufacturers. The report also drives all the dimensions to be considered by the automakers to have a comprehensive standardization adaptation, among other factors for growth. The Chinese market is constantly growing over time despite the hiccups in a business set up. The hiccups can be reduced when all the theories herein are followed, and they patch up the loopholes that weaken their automobile industries.
Recommendations
This research has examined both the internal and the external factors to have a superior marketing brand that is an all-round link towards positive credibility. It shows the automobile industry lacks effective managerial skills, and technology evolution in some industries is lagging. Such challenges impend the internationalization of their firms. The Chinese automakers face massive challenges in making eco-friendly cars. The following are the possible solutions to the problems facing the automotive industry in China.
- Chinese firms should introduce more technological interventions in their automobile industries to lower their production cost, reducing their development cost.
- Industries should establish a strong managerial team by providing a training base where skills and knowledge are nurtured.
- The industries should go above and beyond in ensuring they employ a manager with international experience or even employ a foreign manager who will come with the global knowledge in steering the industry into a world-class firm.
- The Chinese government can enforce strict environmental policies to reduce poisonous gas emissions into the atmosphere.